NDP Response to FATCA

Thanks for sending the Green Party announcement regarding the U.S. Foreign Account Tax Compliance Act (FATCA). I have asked our National Revenue Critic, now Murray Rankin, to fill me in on the latest.

The NDP is very concerned that the Harper government is currently participating in negotiations with the US over an Intergovernmental Agreement (IGA) for the implementation of FATCA in Canada. As you know, such an agreement would likely require Canada to enact laws and regulations that would require Canadian financial institutions to comply with FATCA. The NDP has serious concerns both about the lack of transparency and consultation during the negotiation process and the potential infringements on the rights of Canadians.

If implemented, the IGA would likely require Canadian banks, investment funds and other financial institutions to disclose annually to the U.S. Internal Revenue Service (IRS) accounts held by American Citizens, which includes dual citizens in Canada. Failure to disclose account information could result in a withholding tax applied to U.S. income earned by the institution or by account holder. The US’ stated policy goal of FACTA is to aggressively target American citizens who are improperly shielding assets in offshore accounts, with no consideration of the nature of existing Canada-US tax cooperation and the fact Canada is by no means a tax haven for Americans.

Essentially, FATCA would allow the United States to bypass the exchange of information between the IRS and the Canada Revenue Agency and instead get information directly from Canadian financial institutions. Apart from the extraterritorial enforcement dimensions to FACTA referenced above, there are widespread concerns that this exchange of information could potentially violate existing Canadian privacy laws.

New Democrats have repeatedly raised concerns over FATCA with the Conservatives and demanded that the government act on its responsibility to protect Canadian citizens from this improper and unreasonable intrusion of a foreign government.

New Democrats have also been fighting for the Conservatives to finally get serious when it comes to tax havens. But this does not mean rolling over and playing dead in the face of a misguided effort of the US to, in effect, treat Canada as a tax have. Just as we believe the Canadian Government has a responsibility to protect Canada’s tax base, we understand the United States’ desire to protect their own tax base — but this cannot come at the cost of the rights of individuals in our own country. We are demanding answers and transparency from the Conservatives on FATCA, and will not support an agreement that violates the privacy rights of individuals.

Again, thanks for contacting us on this. Please be assured that my New Democrat colleagues and I will continue to stand up both for fair taxation and for privacy rights, as well as for an approach to tax havens that is both aggressive and, unlike FACTA, reasonable.

61 thoughts on “NDP Response to FATCA”

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@tim
That’s a good question re Adrain Dix. FATCA is bound to cause a great deal of confusion among the more socialist types who by tradition would reject a big, bad US overreach, but would be inclined to support in general a means by which to increase the tax bases of any government, especially if it was viewed that some aren’t paying their ‘fair share’ (like the Linda McQuaig’s of the world). With the great number of USP’s living in BC, and my guess inclined to vote NDP, he would likely oppose FATCA if it comes down to it.

For what it is worth, I see no reason for FATCA to throw confusion into the ranks of the “socialist types”. I would expect the federal NDP to be:
- Concerned aboug American infringement of Canadian sovereignty
- Concerned that abuse of tax havens by some is unfair to law-abiding Canadian tax payers
- US tax policies towards “US persons” in Canada is unfair

This is exactly the message in Craig Scott’s letter. As I indicated in an earlier post, Atamanenko more than a year ago indicated complete understanding of the situation. Let me add that I attended a public meeting in Ottawa about a year ago, which had NDP representation, namely Hoang Mai, and he certainly gets it.

I can’t account for Linda McQuaig. But she is an individual. As to Canadians for Tax Fairness, if we may include them here, the story looks pretty ambiguous at the moment. There is nothing about FATCA on their website. In response to a question about the usefulness of a “made in Canada” version of FATCA from a member of the House Finance Committee, Dennis Howlett, their executive director, testified Feb 14:

“The problem with bilateral information exchange agreements is that you have to know a lot of information first before you can ask for information. Because of secrecy, it just doesn’t allow the Canadian government to get very far, in a practical way, with these bilateral information exchange agreements. The automatic information exchange, I think primarily through regulations of financial institutions…rather than putting the burden on individuals, like FATCA does.

“So the principle, yes, but some of the details of FATCA are problematic.”

Canadians for Tax Fairness are focused on tax evasion by Canadians. It may take some persuasion before they recognize that the US tax agenda is unfair to innocent people living in Canada.

Something that stood out for me in the February 14 meeting of the H of C Finance Committee is the bad odor around the banking community. The bankers refused to appear; they were represented by the Canadian Bankers Association (Marion Wrobel and Darren Hannah) who were unable to answer critical questions. The banks want the government to sell us out.. It is nice to see them squirm a bit.

Here is an interesting exchange, with more than a hint of evasiveness:

Mrs. Shelly Glover:
[snip] Mr. Wrobel, can you take me through step by step? You said that part of the plan in many of our banks in dealing with some of the information that comes to them is ascertaining identity when some large transfers, etc., are coming in, cash exchanges over $10,000, that kind of thing. What do you do to ascertain identity when this occurs?

Mr. Marion Wrobel:
Say a new customer comes in and makes a large deposit. We clearly establish the identity of the individual.

Mrs. Shelly Glover:
That’s an easy one because the person is there, but most of this happens electronically.

Mr. Marion Wrobel:
No, we’re talking about opening accounts; these are done in person. We identify who is opening the account, the source of the income, and again, we’re talking about relatively large accounts here. Try to understand—

Mrs. Shelly Glover:
I’d rather focus on the transfers that are going offshore. I’m not concerned…and I wish the banks were here. To be frank with you, I’m quite disappointed they’re not, because I would think they would probably be able to take me through step by step exactly what I’m talking about, but they refused to come. So I’m a little disappointed by that, but having said that, can you transfer to the larger problem we have, and that is ascertaining identities, particularly in transferring money offshore?

Mr. Marion Wrobel:
Let me try to take you through the steps, and let me try to be helpful to the committee, as I represent the industry.
We identify who is opening the account and understand the source of the income. They have to be able to explain where it came from.

Mrs. Shelly Glover:
So how did you identify the person who’s not standing before you? That’s what I’m asking you.

Mr. Marion Wrobel:
The person has to stand before us to open the account. We’re talking about opening an account.

Mr. Marion Wrobel:
Okay. Transferring money from one account to another is a legitimate function of a financial institution. It is reportable to FINTRAC if it is large, over $10,000, or if there is any suspicion about the nature of the transaction. If the bank is uncomfortable with the transaction, the bank can say it’s not going to do it. Again, reputation is very—

Mrs. Shelly Glover:
How often does that happen?

Mr. Marion Wrobel:
I work for the association; I don’t…. I couldn’t tell you.

Mrs. Shelly Glover:
That’s why I wish the banks were here.

Mr. Marion Wrobel:
I couldn’t tell you.
Well, again, Mr. Chair, we’re here representing the industry broadly. I’m going to try to answer all of your questions and try to be helpful. That’s why we accepted to come before this committee.

Mrs. Shelly Glover:
I appreciate that, and I don’t mean to put you on the spot, but to define best practices, you have to ask the people doing the work.

I would tend to expect the NDP to continue to be pretty hostile towards FATCA. Linda McQuaig is one off who got her hand like so many big multinational companies caught in the cookie jar. Remember McQuaig’s pro FATCA statements are in a book published in the US and directed towards an American audience of which I assume McQuaig was paid a substantial amount of money to w.rite

I respect what Dennis Howlett is trying to do but he has a tough road ahead of him. Canada probably has the LEAST problem with offshore taxation issues than just about any industrialized country. A lot of this is do a what I call a strong sense middle class egalitarianism which also makes FATCA extremely offensive to Canadians vis a vis other countries. This isn’t to say offshore evasion is not an issue especially in Quebec among the construction industry types but in terms of broader taxpayer morale it is far less than in Australia, UK, US, France etc.

Also along these lines I have heard that CRA is heavily backlogged all this year with “other” projects which will leave it with little or no resources to implement a FATCA IGA. BC getting rid of the HST on April 1st and PEI introducing it on the same day I am told is a very big project inside CRA that will go on for many months.

Thanks for that link. So even though they go through all the negotiations and such, since changing legislation will be involved, Parliament will have a say. Am I understanding this correctly? If that is the case, I feel better about FATCA not being so easily pushed upon us.

One more question- why would PIPEDA take second place to the ITA or the Bank Act? The banks have to comply with PIPEDA, so a change in the ITA outweighs that?

Oil execs, Canadian leaders fret over what U.S. will want in exchange for pipeline approval

WASHINGTON – There are growing concerns among Canadian leaders and oil and gas executives that the U.S. administration will demand concessions from Canada including possible changes to its environmental policies in return for approving the Keystone XL pipeline.

Saskatchewan Premier Brad Wall told journalists at a breakfast meeting Thursday that the power of the U.S. environmental lobby could force U.S. President Barack Obama to try to impose regulations on Canada.

He said this would “not be helpful” and added that Canada would never try to impose domestic policy on the U.S. in exchange for approving a U.S. project.

Wall recently complained in a letter to the American ambassador to Canada about the possibility that the U.S. might use Keystone as an excuse to trespass on Canadian domestic policy.
…

Based on further information I have I’ll re-iterate my later rather sooner prediction. Right now the Canadian Federal Budget is getting in the way of an IGA being completed this spring. This could very well drag into the fall.

Another interesting story someone told me today. When Air Canada transmits the passenger manifests of flights crossing US airspace to the US they don’t give them the passenger names on a flight by flight basis. So the US knows the names of everyone on AC flying over the US but doesn’t know whether they are flying between Toronto and Mexico City or Toronto and Havana. I was told this was a “red line” of the Canadian government after 9/11.

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